Question

weston mines has a cost of equity of 20.8 percent, a pretax cost of debt of 9.4 percent, and a wacc of 17.1 percent. ignore taxes. what is the equity-asset ratio (weight on equity)?

Answer 1

If weston mines has a cost of equity of 20.8 percent, a pretax cost of debt of 9.4 percent, and a wacc of 17.1 percent. ignore taxes. the equity-asset ratio is:0.48.

How to find the equity -asset ratio?

Given data:

Cost of equity = 20.8%

Pretax cost of debt = 9.4%

Wacc =17.1%

Hence,

Equity -asset ratio:

0.208=0.171 + [(0.171 - 0.094) ×E/A]

0.208 -0.171 = [(0.171 - 0.094) ×E/A]

0.037=  0.077 ×E/A

E/A = 0.037/0.077

E/A =0.48

Therefore the equity- asset ratio is 0.48.

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